1. Pensions overview 2016

2. General environment Individual DB schemes in difficulties and changes to benefits and contributions are common. Most closed to new entrants, many closed to future service. DC Schemes – fundamental issue is contribution levels. Price of annuities and fund performance have crucial implications for pensions outcome.

3. FEMPI and Public Service Pensions

4. FEMPI FEMPI introduced pension levy for employees averaging 7% in 2009. FEMPI introduced pay cuts for employees averaging 7% in 2010. FEMPI introduced PSPR on pensions in 2011 averaging 4%. Employees pay above €65K cut further under HRA (July 2013). PSPR for related pensions increased.

5. What happened (1)? PSPR (Public Service Pension Reduction) was introduced in January 2011. It cut pensions in payment including any pensions that commenced up to the end of February 2012 (the Grace Period). 0 – 12K was exempt. 12 – 24K 6% 24 – 60K 9% 60 – 100K 12% Over 100K – 20% (introduced in January 2012) €20K2.4% €30K4.2% €40K5.4% €50K6.1% €60K6.6%

6. What happened (2)? Pensions arising after February 2012 were exempt as the pay had already been cut. Post Haddington Road, original PSPR was increased for pensions above €34132 using the following formula; 0 – 12K exempt. 12 – 24K 8% 24 – 60K 12% 60 – 100K 17% Over 100K – 28%

7. What happened (3)? Pensions above €32,500 arising after February 2012 were now cut post Haddington Road as salaries above €65K were cut, using the following formula; 0 – 12K exempt. 12 – 24K 2% 24 – 60K 3% 60 – 100K 5% Over 100K – 8%

8. LRA – income recovery January 2016 – January 2018 – Pre February 2012 exemption will increase to €34132 with corresponding decreases in PSPR above that amount. These pensions are based on salaries that had not been cut. January 2016 – January 2018 – Post February 2012 exemption will increase to €60,000 with corresponding decreases in PSPR above that amount. These pensions are based on salaries that had already been cut. Because of LRA grace period no one will retire on HRA reduced salaries.

9. Where does all this leave us? Best examples are pre February 2012 figures. €25K pension – nil PRPR in 2017 €25K salary – Levy will be gone but still €161 below 2009 rate. €50K salary - €2125 levy remains and salary €2243 below 2009 rate. €25K pension is 55% of effective current salary. €30K pension – Nil PRPR in 2018 €30K salary – €125 levy remains and salary €322 below 2009 rate. €60K salary - €3125 levy remains and salary €3054 below 2009 rate. €30K pension is 56% of effective current salary.

10. Current pensioners The changes to the PSPR on pensions up to €34,132 will fully unwind the cuts for 80% of public service pensioners. The remaining 20% are in the following pension bands; 1.34,132 to 40,000 - 16,800 pensioners. 2.40,000 to 50,000 - 10,100 pensioners. 3.50,000 to 60,000 - 3,100 pensioners. 4.60,000 to 70,000 - 800 pensioners. 5.70,000 to 80,000 - 700 pensioners. 6.80,000 to 90,000 - 300 pensioners. 7.90,000 to 100,000 - 200 pensioners. 8.Above 100,000 - 500 pensioners.

11. Indexation Former parity arrangements in tatters. Pensioners are above parity. This will last to 2018 and beyond. All salaries above €25K will still be below 2009 rates. All salaries from €29K will still pay levy. Legislation in place to allow for application of CPI to public service pensions. Not activated (so far). 25,000 workers now in single scheme with CPI indexation in place for accrued benefits and any pensions in payment. End 2014 outcome was -0.3% but negative outcome is not allowed. End 2015 outcome expected to be similar.

12. DPER Minister, Dail – 27 th January 2016 Section 47 of the 2012 Act provides for the possible extension of this CPI linkage to pensions paid by other pre- existing public service pension schemes subject to ratification of an order by both Houses of the Oireachtas. However, no order to this effect has been made to date. Instead, and reflecting the realities of the fiscal crisis and the emerging recovery, I have acted to commence, with effect from 2016, the reversal of the unprecedented cuts to public service pension rates which have applied since 2011 by way of the Public Service Pension Reduction (PSPR) under the financial emergency legislation. This part-reversal of pension cuts is delivering effective pension increases through changes to the applicable PSPR tables. When fully rolled-out from 1 January 2018, these changes mean that all public service pensions with pre- PSPR values of up to €34,132 will be fully exempt from PSPR, while those pensioners not fully removed from the reach of PSPR will, in general, benefit by €1,680 per year. The cost of these changes is estimated at about €90 million on a full-year basis from 2018. Looking beyond PSPR restoration, it will be necessary in due course to consider the question of how to adjust the post-award value of public service pensions in the medium term. I expect the Government to return to this issue at the appropriate time, as we move beyond the FEMPI era towards a more normal environment for pay and pension setting, all the while continuing to ensure the affordability of the cost of the public service over the long term.